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Company Break Down

EOG Resources – Strong Outlook

EOG Resources Inc. is an American crude oil and natural gas company based in Houston Texas, trading on the NYSE under the ticker EOG. The company operates drilling sites in Canada, the United States, Trinidad and Tobago, the United Kingdom, and China. The majority of its production comes from the United States and Trinidad and Tobago, however. EOG’s main operations come 90.4% of EOG’s production takes place in the United States, the remaining operations takes place in Trinidad and Tobago representing 8.7% of production, and the rest of the global operations only representing less than 1% of production.

EOG navigates industry depreciation

In response to declining global oil prices, EOG insulated itself in 2018 by stagnating capex throughout the year, giving them a financial buffer. Additionally, EOG increased its common share dividend payouts twice in 2018, with a cumulative sum increase of 31%. This increased the yield to a growing 0.9%. EOG employed this tactic in 2018 to retain shareholders faith in the company, and to protect the balance sheet with an even more uncertain commodity outlook, and is planning on continuing this trend through 2019.

EOG surpasses quarterly earnings milestone

EOG’s share price hit a 52-week low in December 2018, trading at $82.04 USD/share, yet has since recovered largely in part to its previous quarterly report, in which the company reported earnings well above expectation. EOG reported earnings of $4,781.62 million USD approximately 5% higher than the average projections and a 21.71% increase since EOGs last quarterly report. Additionally earnings per share exceeded estimates by 15.13% and are currently reported at $1.75 USD per share. While EOG is a highly levered company since 2017 it has reduced its debt by over 20% and now reports a debt-to-equity ratio of 0.35. This shows strong management to be able to adapt while many peers fail to spend within cash flow, which allows EOG to return capital to shareholders and improve the ever important balance sheet.

Future Drivers and Trends for EOG

In 2018 EOG cut capex and focused on domestic operations adding over 1500 net drilling locations within the Powder River Basin, increasing EOGs operational representation from 2% to 17%. This established the company as the second largest operator within the popular region. Furthermore, EOG has announced that the Basin yield far exceeds the company’s previous estimations, now claiming two-billion barrel equivalent of potential resources. Taking into consideration American legislative bodies trend in favour of big oil, especially in Montana, home of the Powder River basin, EOG has plans to expand operations even further into the basin to capitalize on the two-billion barrel shale.  

Improvement

Following EOG Resources Inc. strong revenue growth, increasing dividend payouts, and increase in domestic operations in new shale regions many financial analysts across the board have increased the company’s rating.